Telecoms scandal hurts India’s image

THE SCANDAL convulsing the Indian telecoms market threatens to deter foreign companies from investing there and could call into question the business case for expanding into emerging markets in general.

Once seen as a potential gold mine for its rapid growth and huge population, the Indian market has proven especially nerve-wracking for Western telecom operators because of unexpected regulatory changes and competition.

Now the latest row has taken on an extra diplomatic edge after the Supreme Court ruled eight companies, including six with foreign stakeholders, would lose some or all of their telecoms permits, following a scandal-tinged 2008 sale.

To make matters worse for the operators, the telecom ministry said on Wednesday it could take about 400 days to hold an auction to redistribute the licences, in a major blow to companies like Norway’s Telenor or Russia’s Sistema that have poured billions into the market and now face a legal minefield.

“The investor climate in India will be changed forever, for everyone if this happens,” Jon Fredrik Baksaas, the chief executive of Telenor, said, as he warned that his group could still quit India if things did not improve.

The Norwegian government, which owns 54 percent of Telenor, has intervened with Indian authorities to argue Telenor’s case after its Uninor joint venture looked set to be stripped of its licences to operate. Telenor has been the most aggressive of the new entrants and by December last year it had spent $2 billion (R14.9bn) to build up a base of 36 million subscribers.

Baksaas said that much would depend on whether Telenor could convince the Indian authorities to adopt an approach that would allow it to stay and mount a realistic fightback. That would include limiting the spectrum to players that had lost licences, and not allowing market leaders such as Bharti Airtel and Vodafone to sweep in and scoop up extra spectrum. – Reuters